You are not currently subscribed. Click Subscribe below to receive the Leaguer email.

FinCEN Issues Final Customer Due Diligence Rules

Thursday, May 12, 2016 6:40 AM

The Financial Crimes Enforcement Network said it will publish long-awaited customer due diligence rules Thursday, which will require credit unions and other financial institutions to identify and verify the beneficial owners of legal entity customers.

In a significant change from the proposed rules, issued in 2014, financial institutions will not be required to comply with the new rules until May 2018, compared to the one-year waiting time contained in the proposed regulations. FinCEN said the single year specified in the proposed rules would not give financial institutions enough time to change their current internal systems.

While CUNA is still examining the rules, officials there said they are pleased that FinCEN is delaying the effective date. Still, they said they are not happy with the final result.

“Although this is a final rule, we will continue to push FinCEN for improvements,” CUNA said in response to the announcement.

When it issued the new rules, FinCEN said covered financial institutions are currently not required to know the identity of individuals who own or control their legal entity customers. The new rule will correct that, FinCEN said.

“This enables criminals, kleptocrats, and others looking to hide ill-gotten proceeds to access the financial system anonymously,” FinCEN said when outlining reasons for the rules. “The beneficial ownership requirement will address this weakness and provide information that will assist law enforcement in financial investigations, help prevent evasion of targeted financial sanctions, improve the ability of financial institutions to assess risk, facilitate tax compliance, and advance U.S. compliance with international standards and commitments.”

The rules will require credit unions to obtain and verify the identity of all beneficial owners at the time an account is opened. Credit unions may use a standard certification form that is contained in the rules or any other means that complies with the rules. Credit unions will be required to maintain records and may rely on another financial institution’s verification.